Ernst & Young delivered the PowerPoint presentation at a recent meeting of the State Government Affairs Council, which bills itself as "the premier national association for multi-state government affairs professionals of over 120 major US corporations, trade associations and service providers." Ernst & Young made the pitch to a who's who of leading companies -- Alcoa, Anheuser-Busch, Bank of America, Bayer, BellSouth, Best Buy, Capital One, Coors, Goodyear, Home Depot, MBNA, Microsoft, Nextel, Nissan, Pfizer, Toyota, Verizon, and Wal-Mart.

Ernst & Young acknowledges that taxpayers don't like corporate welfare but suggests ways to "provide government with justification" for giving tax incentives to businesses. A key strategy is to identify "public benefits" while making a threat of dire consequences if the deal is not made. At the same time, the PowerPoint presentation suggests techniques to prevent states from rescinding the tax incentives if the promised public benefits do not materialize.

Ernst & Young holds out the recent Boeing-Washington state deal as the model. Faced with Boeing's threat to move manufacturing jobs out of state (following the relocation of its corporate headquarters to Chicago), Washington ponied up almost $4 billion in tax incentives. Yet, as the Evergreen Freedom Foundation notes, Boeing since has shed more than 4,200 jobs in Washington. But the deal stipulates that "the state shall not suspend, revoke, or require repayment" of the tax incentives, no matter what Boeing does on the jobs front. The deal even requires Washington to "assume the entire defense" for any legal challenge to the $4 billion package, including "all fees, costs and expenses"!

» Milking the economic development incentive cash cow from Miscellany
Paul Caron discusses an Ernst & Young presentation that was used in advising large corporations in the best ways to get the largest location incentives possible from state and local governments. Paul Caron summarizes: Ernst & Young delivered the PowerP... [Read More]

Tracked on Jun 6, 2004 4:11:12 PM

Comments

Brazen? The title, absolutely. But other than that, it strikes me as good business practices. You can't really blame businessmen if the states are willing to lavish millions and millions of dollars on them for things they were going to do anyway.

And when the state involves itself intimately in many of the day-to-day practices of business, why would you not expect to see the business community try to return the favor?

I say this as a part of top management in a State tax collection agency.

Posted by: jsmith | Jun 5, 2004 8:01:24 AM

Financial incentives provided directly by the states or indirectly by underwriting the bonds of their local governments (cities and counties) providing such incentives is financial bribery.

Such incentives subverts the law of comparative advantage and build in perpetual inefficiencies in the local and state economies. Such incentives are bad public policy and should be stopped.